November 14, 2017
The Future of Public Housing
The Terner Center for Housing Innovation at UC Berkeley has posted Lessons for the Future of Public Housing: Assessing the Early Implementation of the Rental Assistance Demonstration Program. Housing policy analysts have bemoaned the chronic underfunding of public housing for decades to little effect. This study looks at a relatively new initiative, the Rental Assistance Demonstration program and evaluates how local public housing authorities have played the hand that they have been dealt by Congress, as weak as it may be. The study opens,
In its 2018 budget, the Trump Administration is proposing to slash public housing funding by $1.8 billion, a 29 percent decline from 2017. This is on top of nearly a decade of continued cuts to public housing, for both capital improvements and operations. The consequences of these perpetual funding shortfalls are dire for the 2.2 million residents who live in public housing, exposing them to significant health and safety hazards from the lack of maintenance, including exposure to mold and lead paint, rodent infestations, and outdated electrical and sewage systems.
While the Senate markup of the appropriations bill reverses some of the more drastic funding cuts proposed by the administration, the amount of funds allocated to the public housing operating and capital funds remains well below need. Nearly half (44%) of the nation’s public housing stock was built before 1970, resulting in significant need for maintenance and rehabilitation. However, federal funding for capital investments in public housing dropped by 50 percent between 2000 and 2015, generating a $26 billion backlog of capital repairs. The lack of maintenance is directly tied to the loss of public housing units: approximately 300,000 units— more than 20 percent of the total public housing stock—have been demolished over the past 20 years due exclusively to units being uninhabitable.
At the same time, the Senate markup lifts the current 225,000 unit cap on public housing conversions under the Rental Assistance Demonstration (RAD) program, signaling its support for the program. Congress passed RAD in 2012 to address the chronic underinvestment in public housing. Through the RAD program, public housing authorities (PHAs) can convert their portfolio of HUD-funded units to project-based Section 8 contracts, and in doing so, be positioned to tap into private sources of funding for real estate, including debt and equity. These funds can be leveraged to rehabilitate older buildings and protect units from obsolescence.
Though RAD may seem novel, most affordable housing built today is financed with multiple sources of funding. For example, the Low Income Housing Tax Credit (LIHTC) program, which helped finance 2.78 million units of affordable housing built between 1987 and 2014, has long used debt and equity financing to produce and preserve affordable housing. Debt financing is a powerful tool: it is the same principle that allows households to buy a home with only a down payment.
But debt financing also entails risks, including the risk of default. Ensuring that deals are appropriately underwritten—and have adequate gap funding support—is critical for the longterm financial viability of the properties. The introduction of debt financing also requires strong property and asset management skills, which do not always exist at the local level.
And RAD changes the governance and streams of funding for public housing, which has implications for housing authority capacity and sustainability over the long-term. Thus, mechanisms need to be in place for oversight and accountability, especially as it relates to tenants’ rights and well-being.
In this policy brief, we summarize findings from more than 25 interviews with staff at public housing authorities and other organizations across the country who have been engaged in the implementation of RAD at the local level. The goal of this brief is to highlight the challenges that housing authorities have faced in implementing RAD in their markets, and to share best practices that have emerged in RAD implementation. Future research will look at the impact of RAD from the perspective of residents.
The brief covers RAD implementation in a wide range of housing markets, including communities in Arizona, California, New York, North Carolina, Tennessee, and Texas, to highlight RAD’s flexibility and limitations in different market contexts. In San Francisco and New York, for example, RAD is being used as a tool to leverage funds needed to preserve public housing stock in the face of high housing costs and significant concerns over displacement. In Laurinburg, North Carolina, RAD is helping expand the capacity of the housing authority to manage its stock in a region hard-hit by the recession and ensuing job losses. In many of the markets that we studied, PHAs are converting all of their public housing under RAD –known as a “portfolio” conversion—allowing us to explore the implications of a changing institutional landscape for public housing at the local level.
Overall, respondents stressed the benefits of RAD, but also provided insights into how the program could be improved moving forward. Because many PHAs are still undergoing RAD conversion, and there are discussions at the federal level to lift the cap on the number of units that can be converted, these insights are particularly timely. Given political realities and federal budget constraints, RAD may well be the best prospect for preserving public housing going forward. The program could be made even more effective by drawing on the lessons learned on the ground in the first few years of the program. (2-3, citations omitted)
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